The fracture healing process is impaired in 10-20% of the 6.2 million fractures occurring annually in the United States. There is a compelling need to develop novel therapies to improve fracture healing and to treat fractures that fail to heal (non-unions). Bone marrow mesenchymal stromal stem cells (MSC) have all the properties to become a novel therapeutic approach to treat non-unions. They are located within the fracture as part of the innate healing process, but they can also be isolated and expanded for autologous transplant. They can differentiate into distinctive end stage mesenchymal cell types including bone and cartilage, but they also secrete bioactive molecules that regulate the regenerative microenvironment of an injured tissue. Bone morphogenic protein-2 (BMP2) is one of these secreted molecules that are crucial to the fracture repair process. Studies published in Dr. Spagnoli's laboratory have provided critical information on the dynamics of MSC homing to the fracture site after transplant based on the need for CXC chemokine receptor 4 (CXCR4), their engraftment into specific niches (endosteum), expression of BMP2 and their effects during the repair process (promotion of callus formation and augmentation of bone strength). My recent work revealed that BMP2-expressing MSC uniquely engrafted in the endosteum and localized adjacent to chemotactic stromal cell-derived factor-1 (SDF1; CXCL12)-expressing cells, suggesting a specific need for BMP2 expressing cells in this niche. Deficiency of BMP2 in limb progenitor cells delays fracture healing, reminiscent of a non-union. I found that this delay due to BMP2 insufficiency can be rescued with transplanted MSC through increased new bone formation and improved material properties. The central hypothesis of this proposal is that BMP2 expression from MSC is needed within the endosteum for the regenerative effects of MSC during fracture healing through regulation of SDF1-abundant cells. This proposal outlines the study of the regenerative effects of BMP2 from MSC in fracture healing through the following two aims: Specific Aim 1. Determine the effect of MSC and BMP2 signaling on the regulation of SDF1 expression in endosteal cells as a mechanism to initiate the MSC reparative process. In vivo and in vitro experiments will be applied to study the effect of BMP2 on SDF1 expression and differentiation of SDF1-abundantly expressing cells. Specific Aim 2. Characterize the regulation and the temporal pattern of BMP2 expression in fracture healing. Using BMP2-LacZ reporter mice and MSC, I will study the timing and localization of BMP2 expression in fractured tibias. I will also use the novel Formaldehyde-Assisted Identification of Response Elements method to uncover regulatory sequences from BMP2 enhancer regions of MSC undergoing osteogenic differentiation. These studies would have major biomedical relevance and implications, as they could lead to a better understanding of the regulation of BMP2 and the mechanisms for a novel, cell-based therapy to promote fracture healing in patients with non-unions.